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Imagine that there are three countries A, B, and C. In the first the interest rate is 2% in the second it is 3% and

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Imagine that there are three countries A, B, and C. In the first the interest rate is 2% in the second it is 3% and in the third it is 4%. Assume risk neutrality and perfect capital mobility. Furthermore, imagine that currently the exchange rate between currencies of countries A and B is equal to 100 and the exchange rate between currencies of countries B and C is equal to 2. What do you expect the exchange rate between currencies of countries A and C be two period from now? Assume that exchange rates are quoted in units of foreign currency needed to buy a unit of domestic currency. 200 204 196 None of the above

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